Board of Directors: The Buck Stops Here

October 24, 2024

The most powerful decision-making authority of large nonprofits is the board of directors. The CEO reports to the board; they approve all executive compensation and green-light all strategic changes. Board members hold the ultimate responsibility for keeping the organization on mission and fulfilling donor priorities. Most importantly, their decisions and leadership either accelerate or decelerate the development of a T1D cure.
 
This is the 10th annual review of the board of directors at Breakthrough T1D and the American Diabetes Association (ADA). This report addresses the importance of the board of directors, identifies several key challenges they face today, and offers constructive recommendations.
 

What Does the Board Do?

“Noses In, Fingers Out” is often used to describe the role of a board member. Members are involved in major strategic decisions, keeping an eye (or nose) out for big-picture opportunities without getting involved in hands-on, day-to-day operations. Tactical direction changes, such as an organization rebrand or a shift in mission, should be discussed with and approved by the board of directors. They are responsible for approving executive compensation and ensuring the organization is high performing and operating ethically and legally. These directorial duties are mandatory. In for-profit companies, board members can be sued by shareholders when these duties are not fulfilled.
 

What Does the Board Not Do?

On the other hand, board members do not and should not get involved in day-to-day operations. Micro-management, though well intended, can be detrimental to the business operating efficaciously. Operating decisions are left to the CEO and the management team.
 
However, the board plays a fundamental role in guiding and shaping the actions of the on-the-ground leadership team by shaping strategy as well as evaluating, hiring, and, if necessary, firing an underperforming CEO. The CEO is responsible for daily performance, the board is responsible for annual performance. In for-profit companies, the board is accountable to shareholders.
 
We argue that a nonprofit board should be held accountable to donors. T1D community donors should be provided the means to voice approval or disapproval in a way that influences change—a mechanism that does not exist today.
 

Post-COVID Challenges and Opportunities

During COVID, Breakthrough T1D and the ADA made foundational changes that continue to provide opportunities. Both made sizeable cuts, streamlining personnel, office space, meetings, and research grants. Since then, both nonprofits have begun to re-expand.
 
Breakthrough T1D built a huge cash and short-term investment stockpile during COVID, larger than at any point in the past twelve years. This is advantageous, providing a safety net in an unforeseen downturn. Though, as a nonprofit, it has a fiduciary duty and responsibility to deploy those funds as quickly and effectively as possible to achieve its mission. We are at a unique juncture in history, where stem cell research is advancing and on track to solve the issue of cell supply. The board should push Breakthrough T1D to use this surplus, expediting stem cell research by creating a dedicated Practical Cure program or initiative. Sitting on this stockpile and missing opportunities to boost this research, is not in line with donor priorities.
 
The ADA faces a steadily declining revenue stream and a slow decay in relevance to the T1D community. The board faces existential decisions vis-à-vis the T1D community. When we speak with T1D community members regarding organizations with T1Ds best interests at heart, the ADA is increasingly, outright, dismissed. Yet, our surveys reveal many in the community still trust and respect the ADA brand. But for how long? ADA leaders are combative toward external suggestions, so change will not come from them. The board must decide how it wants to be perceived in the T1D community and encourage ADA leadership to be straightforward and transparent. Will the ADA rebuild its reputation and influence within the T1D community, or will it become solely focused on T2D?
 

Board Size Remains Effective

Both the ADA and Breakthrough T1D maintain an effective board size. A moderately-sized board of directors allows for the full engagement and participation of each member. A group too small limits diversity of perspective. Too large can lead to fragmentation.
 
Over the past decade, both nonprofits have reduced the number of board members, consistent with recommendations provided in prior editions of this report. This is a good thing. As of this report, Breakthrough T1D and the ADA both have 15 board members.
 
Board members for both organizations are listed in the appendix below.
 

Recommendations

What can nonprofit boards do to fundamentally improve the performance of their organizations, and, as a result, accelerate a Practical Cure? The JDCA offers four key recommendations, informed by best practices from the corporate world while acknowledging the unique circumstances of the nonprofit environment.

1. Elect board members from without, not from within. Today, nonprofit board members can only be appointed or removed by fellow members. Board member election by a broad base of donors would foster accountability and ensure alignment with the donors who fund the organizations.
2. Shift executive pay to performance based. Pioneer nonprofit executive compensation by borrowing from the best for-profit companies. Shift the payment structure from primarily guaranteed base pay, to primarily performance-based pay. Put in place genuine, measurable objectives that weigh compensation against progressing the nonprofit mission and Practical Cure progress. Pay well for real advances.
3. Enact a ‘Say on Pay’ executive compensation structure. A ‘say on pay’ initiative would allow donors to vote on aspects of executive compensation such as pay structure, base pay, and bonus amounts.
4. Establish a dedicated Practical Cure program. Given recent advances in stem cell research, there has never been a better time to fully back solving the cell supply issue. Establishing a dedicated cure initiative with measurable goals could substantially accelerate a Practical Cure.

Appendix: Board of Directors

Breakthrough T1D International Board
Lisa F. Wallack, Chair
Matt Varey, Vice Chair
Michael Alter
Elizabeth Caswell
Mike Gordon (new)
Claudia Graham
Michelle Griffin (new)
Karen Jordan
Joseph P. Lacher, Jr.
Per Lundin (new)
Carlton McMillan
Jennifer Schneider
Christopher Turner
Drayton Virkler
Karey L. Witty

American Diabetes Association Board
Rhodes B. Ritenour, Chair
Charles Henderson, CEO
Mandeep Bajaj
Robin Richardson
Janet Brown-Friday
Sean Pittman
Rodica Busui
Patti Urbanski
Rita Rastogi Kalyani (new)
James Tai
Todd F. Brown
Joshua J. Neumiller (new)
Francisco Prieto
Rone Luczynski
Christopher K. Ralston